Do Ford’s High Fleet Sales Make the Tundra Look Bad?

Last Friday, I received a comment on our article that asked “What happened to the Tundra?” from Jason Lancaster, administrator of TundraHeadquarters.com that prompted me to take a closer look at whether I was missing an angle in my high-level annual sales analysis of the full-size pickup market from 2007 through 2010. In the original article, I noted that Ford has been eating everyone else’s lunch, and that Toyota in particular has taken it on the chin. Jason’s contention is that I painted with too broad of a brush when drawing my conclusions about the Tundra (which, by the way, I never said was a failure; I just want to know what happened to it).

As a website owner and more than just a commenter, Jason has the ability to offer more of a voice than someone who typically comments on something we post would. His additional analysis can be found here. After reading his work, I had a few additional comments. When I was around the 375 word mark in my comment on TundraHeadquarters, I decided that rather than giving him content for free, I’d just write another article about it for Autosavant.

While I didn’t address the fleet vs. retail mix in my original article, according to Jason’s assumptions, the Tundra’s market share has fallen similarly when looking at the total number against your retail only estimate. The Tundra’s 2010 total market share is 75% of its 2007 market share. The Tundra’s 2010 retail market share is 76.2% of its 2007 share.

At the same time, the F-150’s 2010 total market share is 122% of its 2007 total market share, and its 2010 retail share estimate is 124% of its 2007 retail share. So there’s not much of a difference with either truck in this respect.

So while its retail share is higher than its overall share, it has fallen very much in line with the truck’s overall share decline. You can see when comparing my original Overall Share numbers with the Retail Share estimates calculated by TundraHeadquarters, the big difference between the all-in share and the retail-only share estimates is that the Tundra’s retail share is a not-insignificant 2.4 percentage points higher than its overall share. Put another way, its retail share is 34.8 percent higher than its overall share. In contrast to the Tundra and Titan having larger retail share than overall share, the opposite is true of the GM, Ford, and Ram trucks, which of course means that the domestic brand trucks are showing a higher overall share due to fleet sales.

As the folks at TundraHeadquarters point out, fleet sales clearly aren’t as ideal as retail sales. But there are different kinds of fleet sales, and some are worse than others. Daily rental fleet sales are the least desirable; sales to commercial fleets (which I suspect is where the majority of F-150 fleet sales are going) aren’t as bad. Those former are dumped into the used-car market relatively quickly and are driven by scores (if not hundreds) of different people. The latter are typically driven by the same person, or a small pool of people, and stay in service until they wear out. So when Ford’s sales analyst proudly trumpets that the F-Series is the bestselling fleet vehicle, he’s not referring to a percentage of sales, but pure volume. Since the F-Series is the highest-volume vehicle sold in the US, it already has a huge head start in becoming the fleet sales champ. And, since nobody knows exactly what the F-150’s fleet makeup is (either as a percent of sales, or a breakdown among the types of fleet sales), we have to either rely on assumptions or use the overall sales figures. That being said, I’d kill to get access to the type of data I found when I wrote this article about fleet queens in 2007.

Don’t think for a minute that Toyota wouldn’t LOVE to get a piece of Ford’s fleet action by selling to contractors and government agencies and the like if they could. Fleet sales aren’t as good as retail sales, but they’re better than no sales.

So as a percent of its total sales, it’s quite likely that Tundra retail sales are larger than the F-Series’ retail sales. But does that really change the point of my original piece? Jason’s conclusion at TundraHeadquarters begins with:

I don’t know what the exact truck fleet mix is for each manufacturer in each model year, but neither do the fine folks at AutoSavant when they argue that the Tundra’s market share is falling. All they can do is roll retail and fleet sales into one big pile and then draw conclusions that, frankly, shouldn’t be drawn.

I disagree that the conclusion shouldn’t be drawn. Even Jason’s retail share estimates show a significant drop in the Tundra’s market share, from an estimated 12.2 percent in 2007 to 9.3 percent in 2010. That’s against the backdrop of lower overall full-size pickup sales in 2010 than in 2007. According to TundraHeadquarters’ own estimates, the Tundra has lost a quarter of its retail share over the past four model years.

Based on conversations with folks in Toyota sales, I’m of the opinion that the Tundra’s share of the retail market place is only slightly lower than it was in 2007. This would explain why Tundra’s resale values remain high (consumers still trust the brand), for example, and it might also explain why Ford resorts to massive incentive spending every August to maintain their sales crown. If Ford’s share were really growing so strongly, why would they offer as much as $7500 back on a new truck? Seems like profitability would come first if market share were really increasing so rapidly.

Bottom Line: When Joe Consumer sits down to buy a new pickup, he’s likely giving just as much consideration to the Tundra now as he did 4 years ago. There’s not enough data to support the conclusion that Toyota has somehow “failed” with the Tundra.

That’s his bottom line. And mine is that my original editorial began with the presumption that Tundra sales are not meeting expectations, simply because Toyota’s aggressive plans for the Tundra five years ago have not materialized. The presumption that my earlier piece began with was that something is wrong with Tundra sales, so it asked “what happened to the Tundra?” Heck, Jason Lancaster himself said in 2007 that Tundra sales were not meeting early expectations. He didn’t dig into market share, fleet sales, or any of those details at that time. And again, I did not use the words “fail” or “failed” in my original article a single time.

It’s clear from what Toyota executives said (and did – with the huge production capacity that they built for the Tundra, and which was later dismantled) that Toyota was hoping for more from the Tundra. The Tundra’s sales are not strong relative to its peers, and the Tundra has lost more of its pre-recession sales than all of its competitors have, save Nissan. To pretend that Toyota is somehow satisfied with Tundra sales at the 100,000 mark when the 200,000 number was thrown around with abandon a few years ago sounds more like fans of the Tundra perhaps giving their favorite truck more credit than is due.

If the answer to the Tundra’s falling sales and market share is that the competition is dumping trucks with huge rebates (and citing a limited-eligibility, Chicago-only model-year-end $7,500 Ford rebate 10 months ago as proof), that doesn’t explain why a Tundra CrewMax 4×4 Limited and an F-150 SuperCrew Lariat Limited 4×4 each have identical $2,000 rebates today in my Zip code, according to CarsDirect.com.

Regular readers know that we have no axe to grind with any manufacturer. We have a balanced perspective on the auto industry, and if the Tundra fans want to accuse me of favoritism for Dearborn’s finest, they may want to talk to the guy who accused me of being a “GM fanboi covering Ford after I gave the Lincoln MKS an unfavorable review.

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

8 Comments

Luke

June 14, 2011

Like any other brand-specific blog, tundraheadquarters.com is going to stick up for it’s brand and generate as rosy a view as possible. That’s fine. But deflecting attention to Ford’s fleet sales doesn’t really do anything to explain Toyota’s lower-than-expected sales. Like Chris said, Toyota had big plans for the Tundra. They rolled out almost as many model choices and configurations as the domestics (including steel-wheeled stripper trucks for fleets), built a brand new plant to build them, unleashed a media blitz taking on the domestics directly, and have ended up with barely half the sales they were projecting. And we’re not talking about some plucky start-up, or relatively unknown brand. Toyota isn’t Mahindra, they have a well-established market presence. At some point the blame has to land on the product.

Chris – First of all, thank you for reviewing my article. I also appreciate that you’ve taken the time to consider my arguments.

While I certainly agree that the Tundra’s sales volume – and retail market share – are down, I think it’s important to remember that we have no idea how many trucks Ford sells to large fleet customers.

If Ford’s fleet mix for the F-series has hit 40% (and it very well may have in 2008 and 2009 when consumer sales were off), and if my estimate of Toyota’s 10% fleet sales is high (and I’ve been assured that it is) then the Tundra’s retail share could be close to steady.

Whatever the numbers are we’ll never know, but my contention is simple: A quick review of sales numbers might lead one to conclude that the Tundra is some sort of failure, yet when you account for large fleet sales, the product is holding it’s own in the retail setting.

Also, a minor quibble: Very often, fleet sales figures do *not* include sales to your typical, run-of-the-mill contractor. Unless a business has a fleet PIN code (something a company can’t obtain without at least 5-10 vehicles), they’re reported as a retail buyer. True “fleet” sales are large commercial fleets (i.e. the phone company), government agencies, and rental car companies. While there are financial benefits to fleet sales, retail sales are far-and-away the most profitable.

Retail buyers are also more interested in buying the best product, where fleet buyers are most interested in the best price. When it comes to evaluating the comparative failure or success of a vehicle, fleet sales should always be excluded.

Luke – The explanation of Toyota’s less-than-projected sales volume is simple: the retail market for pickup trucks took a nosedive right as the Tundra was coming into it’s own. Remember that little economic thing we had in 2008?

Blaming the product for a drop in sales during a severe recession is like blaming water for being wet…what else would you expect? Toyota doesn’t have the massive fleet business that Ford, GM, and Chrysler-Fiat do…and fleets were the only ones buying pickups for 2008, 2009, and most of 2010.

Jason, as much as you emphasize the fleet sales issue, surely you can’t believe that’s the only explanation for the Tundra’s sales drop. The truck is selling at (depending on who you’re asking) a half to a third of Toyota’s projected volumes. The overall market is smaller, but Toyota has a smaller piece of an overall market. And as I said earlier, you can bet that Toyota would love to get some of the large fleet business that Ford is grabbing.

Telling Luke that the product is not the problem isn’t fair. The Tundra isn’t a bad truck – my father in law just bought one, in fact. But the fact is, the Tundra is available with fewer drivetrain, body, and suspension configurations than its competitors. Not having and HD or a diesel option is certainly putting a crimp in sales. You can’t blame this all on Ford selling as many trucks as it can to the lowest fleet bidder.

Chris – Ford is *absolutely* offering larger fleet discounts than Toyota. In fact, they’re usually able to offer larger fleet discounts than GM or Ram. Without a doubt, that is the reason for Ford’s fleet success…and anyone who sells fleet vehicles for a living will agree.

Toyota’s fleet business is strong in Camry, Corolla, and Prius. They have excellent economies of scale on the Corolla and Camry, and many entities purchase the Prius in order to be “green” despite it’s higher cost. Otherwise, Toyota doesn’t have much of a fleet program.

As a general rule, high volume vehicles and/or old designs do best in a fleet setting. Old designs have very low R&D costs that must be amortized, while high volume vehicles are able to get cut-rate pricing on components (in addition to lower amortized R&D costs).

Secondly, I agree that the Tundra’s lack of configurations is an issue, as is their lack of an HD variant. I also believe that a lack of a rural distribution network hurts Tundra sales…people in small towns across the USA don’t consider the Tundra because they don’t have a local service shop.

However, none of these things have to do with the product in terms of quality, reliability, design, etc.

The problem I have with some of this sales analysis – not yours – is that people assume sales figures = success. However, when you start to take apart the numbers, you find that the answer isn’t so clear. There are a lot of layers to this onion.

Jason, do you think the fact that Ford has updated their trucks twice since the Tundra’s debut (refreshed exterior, new interior and frame for 2009; new engine lineup for 2011) while the Tundra has had minimal improvements since its 2007 MY debut could also be a factor?

There was an interesting discussion of this topic on Twitter the night that I posted the original article, and several folks at that time pointed out that there hasn’t been nearly the same level of marketing support for the Tundra after its initial launch.

As you said, there are many layers to this onion – many, many reasons for the Tundra not meeting sales expectations, but most would agree that the Tundra is not selling the way Toyota hoped it would.

Chris – The two F150 refreshes have definitely helped Ford sales. The first refresh gave the F150 a new look, the second gave it a new selection of engines. For a long time, the Tundra offered a superior engine/transmission combo, but now that Ford has newer engines that are more efficient, I’m not so sure.

Frankly, the Tundra’s biggest asset now – in light of these enhancements to the F150 – is cost of ownership. Toyota offers good value up front as well as excellent resale. In all other respects, Ford’s truck is equivalent and in some cases even superior.

Again, I’m not saying that Toyota hasn’t lost some sales ground, nor am I saying that sales aren’t lackluster. I’m simply pointing out that looking at sales figures – without understanding the fact that they are distorted by fleet sales – is incorrect. The Tundra did not meet expectations, but it’s certainly not the “flop” some supposed analysts have painted it to be.

Tark

September 8, 2011

Jason, to say that Ford’s fleet success is “absolutely” the result of lower bidding is overly simplistic. While bid price definitely has an impact on decisions, fleets consider many different factors. The overall cost of operation is more important than sales price. If a truck has lower maintenance costs, better MPG, and better resale value, that can more than make up for a higher sales price over the usage life of the vehicle. Cost of repair and parts also has a big impact, as well as legacy — if a fleet already has a particular brand of truck in it’s fleet, there’s a good chance it will stay with that brand as it’s drivers and mechanics are already familiar with it. Over the last three years Ford has significantly increased it’s fleet share (at the expense of Ram and GM) but has actually had a higher average sales price. So the hypothesis that Ford does well in fleet because they are the lowest cost isn’t entirely correct.

As for Tundra’s sales, you’re both overlooking a big piece of the puzzle: the changing truck demographic over the last 5+ years. When Toyota originally launched Tundra in 2000, trucks were at a high water mark, even while small and mid-size trucks were in decline. Toyota didn’t have a full-size truck to compete, so they developed Tundra. Even though it was technically a full-size pickup, the 1st generation was smaller and more cramped than the US offerings, and that impacted it’s initial success as well as it’s image as a “real” truck. When they launched the 2nd generation in 2007, they upsized the entire truck to make it more competitive, which worked. But it didn’t matter in the long run because they got blindsided by a bigger issue.
Tundra was positioned as a full-size truck to compete with F-150 primarily, and Silverado secondarily. But the consumer segment Toyota targeted for Tundra was slightly different than Ford and GM, with what would be significant consequences. When the market was at full swing, many people were buying trucks that weren’t really truck buyers. Meaning they weren’t people that had to have a truck for 9-5 use, or even for weekend use. Back in the mid 00’s, many people were buying trucks as daily drivers, even though they rarely used the trucks capabilities. This was driven by the expanding offerings of high-end trucks with what were traditionally car-like conveniences, as well as better driving characteristics. When gas prices surged, and again when the economy began to falter, these were the first people to get out of the truck segment. This was also a significant portion of Toyota’s targeted consumer — people who wanted a truck, but wanted it to be nicer and more car-like in it’s features and characteristics. It’s a big part of why Toyota’s primary engine offering was a V6 — better MPG for people who were mostly using the truck as a daily commuter. When these people fled the truck segment, Toyota took a bigger relative hit to their potential consumer base than either Ford or GM. F-Series sales were anchored in the traditional blue collar work vocations, while Chevy maintained their agricultural/rural customer base. Toyota needed the borderline truck buyers to achieve their program goals, and those buyers went away — buyers that wanted a truck, but didn’t really need one, and didn’t want or trust a domestic manufacturer. Essentially, car buyers moving up to trucks.
Fast forward 4 years and you have a whole new dynamic. Ford completely reformed their perception with consumers (their quality has actually been on par with Toyota and Honda for 8 years or so, but consumer perception lagged far behind) and Toyota suffered a severe hit to brand image with the recent spate of quality issues. GM lost ground with their bankruptcy, but have since come back fairly strong. So the continued success of Ford and GM trucks has less to do with fleet sales and pricing, and more to do with a changing market that they were in a better position to weather.

Additionally, a couple of quick notes: Total US fleet sales are around 280,000 vehicles annually. Trucks (class 1-7) and vans (class 1-4) make up 85% of the market. Ford holds close to 40% of that volume (up from 30% a few years ago due in large part to GM bankruptcy), GM holds around 22% (down 10%)and the remaining 40% is divided among the other manufacturers, with Dodge/Ram in 3rd place.

One reason Ford and GM can price fleet sale more competitively than Toyota is overall volume. Ford can afford to offer a basic, inexpensive, no-frills work truck for fleets and still turn a profit due to the fact they have so much volume to work with. By contrast, Toyota’s base truck is about $4,000 higher than Ford because it’s not affordable to have as many product splits with their lower production volume.

Ford’s long-term success in pickups leads to higher residual values for their trucks. Since most fleets turn over their vehicles every 3-5 years, a higher residual value is a big advantage in fleet sales.

And lastly, don’t underestimate the value of fleet sales. The more product you can push through a single assembly plant, the lower the cost of each unit. While 100,000 units of fleet sales doesn’t offer the same profit margin as 100,000 retail units, they do help lower the cost of the 500,000+ retail units Ford is selling, making the margin on them even better. Fleet sales are by no means a throw away for any manufacturer.
Note: I don’t really care one way or the other about Tundra’s success or lack of. I just wanted to clarify some of the issues you were both debating.